Posted on 04/19/2010 12:45:25 PM PDT by Lorianne
On a short-term tactical basis, Goldman Sachs clearly has little to fear. It has relatively deep pockets and will fight the securities “Fab” allegations tooth and nail; resolving that case, through all the appeals stages, will take many years. Friday’s announcement had a significant negative impact on the market perception of Goldman’s franchise value – partly because what they are accused of doing to unsuspecting customers is so disgusting. But, as a Bank of America analyst (Guy Mozkowski) points out this morning, the dollar amount of this specific allegation is small relative to Goldman’s overall business and – frankly – Goldman’s market position is so strong that most customers feel a lack of plausible alternatives.
The main action, obviously, is in the potential widening of the investigation (good articles in the WSJ today, but behind their paywall). This is likely to include more Goldman deals as well as other major banks, most of which are generally presumed to have engaged in at least roughly parallel activities – although the precise degree of nondisclosure for adverse material information presumably varied. Two congressmen have reasonably already drawn the link to the AIG bailout (how much of that was made necessary by fundamentally fraudulent transactions?), Gordon Brown is piling on (a regulatory sheep trying to squeeze into wolf’s clothing for election day on May 6), and the German government would dearly love to blame the governance problems in its own banks (e.g., IKB) on someone else.
But as the White House surveys the battlefield this morning and considers how best to press home the advantage, one major fact dominates. Any pursuit of Goldman and others through our legal system increases uncertainty and could even cause a political run on the bank – through politicians and class action lawsuits piling on.
And, as no doubt Jamie Dimon (the articulate and very well connected head of JP Morgan Chase) already told Treasury Secretary Tim Geithner over the weekend, if we “demonize” our big banks in this fashion, it will undermine our economic recovery and could weaken financial stability around the world.
Dimon’s points are valid, given our financial structure – this is exactly what makes him so very dangerous. Our biggest banks, in effect, have become too big to be held accountable before the law.
(excerpted)
Perhaps thats putting the best face on the Wall St/Constitution Ave axis.
Goldman Sachs, the evil empire:
http://sites.google.com/site/disclosuredelta/
Willing to destroy America and its citizens for the old mighty dollar.
The reality 3 Democrats voted to indict Goldman for fraud, for not disclosing a client's trades to a third party buyer, when doing so would have been insider trading.
Yes that's right, the SEC is indicting Goldman for not telling a buyer, something it would have been able to indict them for insider trading, if it had told them.
This whole thing is a smear job, nothing more.
So you support socializing losses? That’s interesting.
The mortgages themselves had already been issued and were already owned. Paulson wanted to short a basket of CDS contracts betting that they would have high credit losses. Was anyone willing to issue those CDS contracts, profiting if the credit losses stayed low enough? Answer yes, some of the most sophisticated mortgage players in the business were - while also hedging for part of it with a third party insurance company.
Did the people taking that side of the trade think no one was betting against them? If so, who did they think was going to pay them if they were right, the tooth fairy? These contracts don't even exist unless someone sells them short for each long there is - just like a future. It would be like going long an oil future and then pretending you didn't know anybody sold it to you.
Next, was Goldman obliged to explain to the buyers that the one selling them short was John Paulson and his hedge fund? As supposedly a material fact? Um, no. In fact, for any broker or bank intermediary to disclose the trade of one client (Paulson) to another (the buyers here), in order to advise them which way to trade, is itself insider trading and it is illegal. The SEC is indicting Goldman for not committing an insider trading violation, as though it had a duty to commit one to help one side of a trade at the other's expense.
Which one, supposedly? Of course, whichever side lost money.
Show me any derivatives trade where someone makes money without the other side losing it on that trade, and I'll show you a round square.
Then the reason the loss was large was, the third party insurer the buyers relied on, went broke. Paulson didn't go broke, he made money. Goldman didn't, it did everything required of it. The buyers didn't, they paid. But somebody else they tried to hedge with had too many bets in the same direction and couldn't pay them all, so the buyers looked around for somebody to sue.
And 3 Democrats at the SEC voted against 2 Republicans at the SEC to go ahead and crucify the unpopular middleman, for public applause.
Why do people who pretend to be conservative and to defend market freedoms and capitalism, fall for these ridiculous class-war smears?
Thank you. Exactly right. I’m really tired of people thinking it is somehow sophisticated to attack the hedge fund marketers, just because they become very rich. They’re no angels, but this is just a propaganda effort to get their financial regulation bill passed, which will put an end to any chance of wealth being accrued outside the privileged few in government who pull the levers.
Maybe Goldman should include presciption meds in their bonus package next year.
Goldman isn’t “better men”, they are trash who knew how to exploit the system.No matter how high they went,sooner or later you will find there is people you can’t buy.
Calling it communism when you criticize a company that is made a mockery of the whole damn system is so much chickenfeed.They have screwed Greece and the EU over,they have screwed us over again and they will continue to screw us over.
AIG owed them a hell of a lot of money and Uncle Sam covered AIG so it could pay back Goldman.It is not communism or capitalism it is extortion.Yeah it should pay to have connections but not to that extent...............
Karl Denninger lays it all out. Defenders of Goldman Sachs, JP Morgan, Bank of America, and the other major players are defending the incestuous relationship between the financial elites and the political elites that trades permanent and unassailable market share in exchange for permanent and unassailable terms in office.
Defenders of Goldman Sachs are stating for the record on Free Republic that they are enemies of genuine capitalism, small business, and freedom. In their desire to keep the truth quiet, hoping to indemnify their long equity portfolios against any more sudden market downturns, they have become defenders of the looter class. And we recognize them as such.
http://freerepublic.com/focus/f-news/2496277/posts
Exactly.
The scariest thing in the world to BIG BUSINESS is small, limited government that doesn’t have the power to eliminate their competition.
There is no such thing as a free market in America.
Corporatisim, mercantilisim is what it is .. and that is FACISIM.
That’s what we have in the USA is fascism.
Now, granted, it’s not as bad here as in some other countries ... but that’s about the best you can say for our system
I agree the ‘financial reform’ bill is a lot of huey ... but we do not have a free market and haven’t for some time.
I don’t think it’s attacking the rich to state that flat out.
People who get rich are not the problem. People who get rich by way of government collusion ARE the problem.
There is a distinction.
Taxpayer bailouts and ‘stimuli’ of companies who do risky trades or make poor business decisions for decades ... where the corps get the upside and the taxpayer gets the downside ... is NOT FREE MARKET.
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